An annus horribilis for Elon Musk as he cuts staff at Tesla, but he drills on

LONDON — The South African born Musk’s tweeting habit came at a price last year. His announcement in August that he would take Tesla private led to a massive fine and he lost his chairman’s position at the electric car company. And of course there was the tweet about the Thailand cave rescuer. Production targets at Tesla were missed and Musk admitted that his cars are still too expensive for most people. The woes of the company has led to job losses for the second time in the past year. This time he has announced that 7% of his workforce amounting to 3,000 jobs are at stake.  But the irrepressible magnet never shy to respond to a tweet has earlier this week responded to an Australian politician looking for a solution to Sydney’s traffic problems by offering to blast a 50km tunnel through the Blue Mountains. He has just completed a tunnel under Los Angeles and while Australian billionaire, Mike Cannon-Brookes labelled the 1 billion Australian dollar price tag as a “bargain for Sydney”, the Australian engineer dismissed it as “a dream”. – Linda van Tilburg

By Anthony Palazzo and Elisabeth Behrmann

(Bloomberg) – Elon Musk is cutting Tesla Inc.’s full-time workforce by 7%, or more than 3,000 jobs, warning in a blog post that the “road ahead is very difficult” as he tries to make electric cars more affordable for the mass market.

The shares fell 7.6% in pre-market trading after the Palo Alto, California-based company said it managed to eke out a profit in the fourth quarter – though a narrower one than the hard-won third-quarter profit it reported in October, the chief executive officer said Friday.

Tesla is under pressure to limit spending as it emerges from what Musk called the “most challenging” year in its history. While it succeeded in scaling up output of its Model 3, the company missed analysts’ production targets during the fourth quarter, and it’s had to cut prices to make up for the halving of a US federal tax credit that’s helped spur sales. The credit is set to drop again in July before going away entirely at the end of the year.

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The company has cushioned its production challenges by initially selling only the highest-priced versions of the Model 3, its first vehicle billed as a car for the masses. In the next few months, as production increases, the company will need to sell lower-cost configurations, Musk said on the blog post. Up until now, the cheapest Model 3, whose base price is $35,000, has cost $44,000, he said.

“Starting around May, we will need to deliver at least the mid-range Model 3 variant in all markets, as we need to reach more customers who can afford our vehicles,” Musk said. “Moreover, we need to continue making progress towards lower priced variants of Model 3.”

Tesla had about 45,000 workers in 2018, so the 7% cut works out to be about 3,150 jobs lost.

Tesla fighters

The company will also see a significant increase in competition for electric cars as traditional manufacturers have started to roll out an array of products that will be measured against its pioneering lineup. Shortly after Daimler AG’s EQC electric crossover, Audi last year unveiled the E-Tron. Its parent, Volkswagen AG, plans to introduce more than 50 purely battery-powered vehicles through 2025 across the group.

Tesla shares dropped to $321 in early US trading. The stock is little changed in the past year – though it gyrated dramatically during 2018 as Musk careened from crisis to crisis: warring with analysts over Tesla’s cash needs; smoking weed in an interview and losing his chairman’s role in an SEC settlement over his tweeted buyout offer that never materialised, all while working furiously to ramp up production of the Model 3.

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Tesla’s overarching challenge is making cars, batteries and solar products cost-competitive with fossil fuels, Musk said Friday in the blog post.

“While we have made great progress, our products are still too expensive for most people,”Musk said. “Sorry for all these numbers, but I want to make sure that you know all the facts and figures and understand that the road ahead is very difficult.”

Incumbent carmakers are also struggling with the high cost of making electric cars. On top of record investment in new electric-car lineups, high battery costs are crimping margins and buyers worried about charging and driving range largely remain on the fence.

Tesla’s layoffs mark the second shedding of workers in a matter of months. In June, Tesla dismissed 9% of its workforce, after misjudging how quickly it could ramp up mass-manufacture of the Model 3 – only to go on an aggressive hiring spree shortly after.